Value in the Commons Economy

What is at the heart of the problems erupting worldwide? Is anything good emerging from these multiple crises? Can a new system grow from within the old one? Is it already here, visible and thriving? These questions are addressed by Michel Bauwens and Vasilis Niaros in this report, Value in the Commons Economy, co-published by Heinrich Böll Foundation and the P2P Foundation. The authors’ main thesis describes the ‘value crisis’ affecting our current world as a sign of an underlying transformation in our ‘value system’. Society is shifting from a system based on value created in a market system (through labor and capital) to one which recognizes broader value streams. These streams are experienced as ‘contributions’ to structures based on the co-construction of shared resources, also known as ‘commons’. While this new system of value creation and distribution still operates within the mainstream value orthodoxy today, the Value in the Commons Economy report emphasizes how pioneering communities are working on expanding the new system from within, and building the potential to eventually break free of those confines.

Bauwens and Niaros explore how new value regimes can represent a shift towards post-capitalist practices. What if the commons represents a new economy that is being born within the old? We invite you to learn more about this powerful societal shift documented in this report.

Click image to read “Value in the Commons Economy” by Michel Bauwens and Vasilis Niaros.

Executive Summary

The value crisis

Our common world is faced with significant questions regarding the evolution of value. We consider the following to be among the most important:

What is value, generally in the context of the allocation of resources in human societies, but more specifically in our ‘digitalized’, ‘networked’ societies where emerging knowledge commons are playing an increasingly vital role?

What ‘should’ value be in a world marked by ecological and resource constraints presently operating at a global scale?

In a world of social, cultural and institutional diversity, can a new ‘value system’ incorporate the multiple values that are not recognized by capitalism, such as the care economy and domestic work?

This report does not offer complete answers to these questions, but it looks at how the new commons-based approaches attempt to deal with them.

There is no consensus about what value is nor from where it is derived, neither cross-historically nor amongst analysts and commentators of contemporary capitalism. What individuals and societies are willing to put their attention and energy toward varies amongst cultures, regions, ideological and social groups within a society, and throughout historical times.

An intense debate persists on whether what determines value is located in the objective sphere (reflecting an amount of labor, energy, capital, resources etc.), such as is claimed by the labor value theory. Another approach is questioning whether it is located in the subjective sphere (the marginalist school, Austrian economics and its influence on mainstream neoclassical economics), whether as a simple correlation of individual desires or as a conscious collective decision and social contract.

There are, of course, major differences between these fundamental approaches. However, according to many authors, there seems to exist an increasing consensus that we are going through a ‘value crisis’ and that a new value regime must be invented. This crisis is characterized by an increased capacity to create common value through commons-based peer production and other practices of the collaborative economy. In these open and contributory systems, many contributors co-create value as a commons which can be used by all those that are connected to networks, but the income is generated by a fraction of the contributors connected to the marketplace.

The current value regime rewards ‘extractive’ production and consumption activities. Indeed, issues like the free labour of digital workers and social media users, the non-recognition of care work, and the ongoing ecological degradation of our planet and its resources are interlinked to the dominance of a system based on extractivism. Therefore, the key underlying shift needed is one from extractive models, practices that enrich some at the expense of the others (communities, resources, nature), to generative value models, practices that enrich the communities, resources etc., to which they are applied. This is what we could call the Value Shift.

Rather than discussing what the new value means for capitalism, the authors of this report ask: What does that new value represent for a shift towards post-capitalist practices? What if the commons represents a new economy that is being born within the old? If one adopts this perspective, two main avenues would be open to us.

The first avenue would be to think about ‘reverse co-optation’ of value, from the ‘old’ system to the new. Can the emerging commons-centric economy, which creates value in and through the commons, use capital from the capitalist or state system, and subsume capital to the new logic?

The second avenue goes one step further within the confines of the already existing commons economy: Can broader streams of value be recognized, and become the basis of a new distribution of value that recognizes the commons and its distinct species of value-creation?

One of the observed reactions is that some productive communities and the entrepreneurial coalitions allied with them are experimenting with generative business models, in which the entrepreneurial entities co-create the commons and create livelihoods for the contributors. An open cooperative that follows the first avenue (reverse cooptation) is Enspiral, through its ‘transvestment’ strategy, i.e. the transfer of value from one modality of value creation to another. This is implemented through the use of external investments with capped returns and the insulation of their purpose-driven activities from capitalist extraction. The second avenue (new value distribution strategies) is followed by Sensorica, which internally creates a value-sovereign distribution through its open value accounting system.

The underlying operating concept here is therefore a quest for ‘value sovereignty’. Communities that are already engaged in the value transition are operating within a dominant capitalist market economy. Thus, they must protect their value sovereignty through membranes that safeguard them from capture by extractive forces, and create reciprocity mechanisms to protect their networks. Finally, they must work at the eco-systemic level, i.e. create connections between value-sovereign meta-networks.

Case Studies

This report explores the open and contributory value practices of three pioneering peer production communities, namely Enspiral, Sensorica and Backfeed. The focus is on their value practices, i.e. how to maintain autonomy, how to create value sovereignty beyond the pressures of the capitalist market, how to generate value flows from the old economy to the new, advances and changes in their accounting practices, etc.

Enspiral is an entrepreneurial coalition of mostly mission-driven entities. These entities provide a wide range of services, including custom development of websites and applications, project management and creative services, all specialized for projects that aim to create social value. Enspiral’s infrastructure is managed by a cooperative Foundation that has a strong open source ethos in the documentation of its practices, along with a participatory design orientation to its structures. More specific, Enspiral calls itself an ‘open cooperative’ because of its commitment to both the production of commons, and an orientation towards the common good.

In the context of our description of a value shift, Enspiral is clearly pioneering a new ‘ethical’ value regime but also finding innovative solutions for what has previously been called ‘transvestment’. The Enspiral culture is coalesced around creating value for the society rather than for shareholders. It is statutorily oriented towards the common good and is pro-actively developing the conditions to serve this purpose. One of its core elements that illustrate this approach on value is ‘capped returns’. The general idea is that the total returns that investors may receive on the equity of a business are capped. For this, the shares issued by a company would be coupled by a matching call option which would require the repurchase of the shares at an agreed upon price. Once all shares have been repurchased by the company, it will be free to re-invest all future profits to its social mission. Through this mechanism, external and potentially extractive capital is ‘subsumed’ and disciplined to become ‘cooperative capital’.

Sensorica is an open collaborative network committed to the design and deployment of sensors and sense-making systems, utilizing open source software and hardware solutions. It is partially a commons-based community and partially a market-oriented entity. On one hand, individuals and organizations mutualize resources to initiate projects, driven primarily by intrinsic motivations. On the other hand, the innovative solutions developed in Sensorica can be exchanged in the market to generate income. In other words, it is experimenting with new ways of interaction between commons and market forms. To directly connect an open contributory system to potential income from the market and other sources, Sensorica has pioneered a complex form of a ‘value accounting system’. This system constitutes a reward mechanism that records and evaluates every member’s input and fairly redistributes revenues in proportion to each contribution to the related projects.

In our interpretation of their value practices, they differ in one essential aspect from the Enspiral model. In Enspiral, there is no direct linkage between the open and free contributions to their common resource base, and the creation of a livelihood through membership in their entrepreneurial entities. There is a ‘wall’ between the commons and the market. In the case of Sensorica, however, they have created independent entrepreneurial entities that have the sole right to commercialize their products and services. The income is directly linked to the priori commons contributions as measured through the open value accounting system.

Unlike our two previous examples, Backfeed is not a really operating peer production community, but its innovative and integrated design features warrants a special discussion. Backfeed is a system based on the use of the blockchain ledger, which imagines itself as a full infrastructure for decentralized production, which comes with sophisticated capabilities to develop incentives and express them through crypto-currencies. By doing this, they address the capacity to more easily create ‘value sovereign’ communities, and make technical tools available for their management of value. If Enspiral has a full wall between the market and the commons, which Sensorica aims to bridge through its open value accounting system, then Backfeed is even more directed towards the market polarity, by an intensive use of ‘incentives’ for the commons-based production.

Whether that is a desirable option is a fundamental question, as commons-based production is said to be based on ‘intrinsic’ motivation, and there is a potential danger that ‘extrinsic’ market-based incentives may ‘crowd out’ commons-based motivations. But with these reservations in mind, Backfeed remains an innovative way to think through the future of commons-based production with much more emphasis on extrinsic incentives and crypto-currency based monetization. Politically, the polarity represented by Enspiral follows a strong commons-based, common good oriented, and community centric approach, while Backfeed’s vision is based much more on the aggregation of individuals, who contractually align with each other, and with more stress on the exchange mechanisms. At this stage of non-implementation, the Backfeed protocol and design should be read as a possible future scenario for value exchange.

Policy Recommendations and Conclusions

The third section of the report explores some policy recommendations related to the aforementioned approaches, and how they could affect society as a whole, and the furtherance of commons-based peer production models. The report summarizes a set of proposals that deal respectively with an ‘economic’ and ‘political’ infrastructure for the new commons-based value regime.

Regarding the economic infrastructure, two aspects of suggested practice and policy are discussed. The first one is related to the protection of the ‘internal value regime’ that is distinct from the external one. This is what we call the practices that insure ‘value sovereignty’. The second aspect concerns the measures against external extractive and rent-seeking activities of profit-maximizing entities towards the commons, but also the positive capacity of reverse cooptation of the means available in the dominant external system.

The policy recommendations related to the political infrastructure aim at building a counter-power at the urban, regional and global level. To this end, a number of proposals is introduced which focus on the creation of the appropriate institutions to support commoners and commons-oriented enterprises on both the local and global level.

Our proposals describe the requirements for a new mode of exchange and production that integrates the requirement of shared knowledge and mutualization of physical infrastructures, fair distribution of value, and compatibility with the ecosystems on which we depend.

To conclude, we believe that a strategy for a multi-modal commons-centric transition offers a positive way out of the current crisis, and a way to respond to the new cultural and political demands of the commons-influenced generations. The commoners are already here and so are the commons, and the prefigurative forms of a new value regime. The time has come for an integrated strategy that both strengthens their economic networks, and the emergence of a new value regime.

“Value in the Commons Economy” was co-published by Heinrich Böll Foundation and the P2P Foundation

5 Comments

A point that needs to be made is that money capital is accumulated, or created out of nothing by private parties as a rent seeking activity. In a commons economy, this needs to be changed to a situation where capital is created by the commitment of the community of stakeholders effected by the use of the capital. Only in this way can capital can become a commons.

Apologies for slow response. Following is my response at a first stab at the need for a meta-narrative noted in the conclusion of the Executive Summary of Democratic Money and Capital for the Commons. References don’t come through in the copy below, but can be provided in a .pdf copy.

Moral Money and Finance: An Econony that Works for Us and the Earth, Not Us Working for Money
by Paul Krumm

We have to realize that we are all enmeshed in the present money system, which makes it difficult to see it as it is. Because those of us who are not on the edge also benefit, through investments and unearned income, its structure is justified in our minds. Let the reader beware. The present analysis gores sacred cows.
Introduction
What is Money? We often talk about what money does, but what is it? The best definition that I have found is that of Bernard Lietaer, a prominent Belgian economist, who, among other things, developed the transition mechanism from the individual European money systems to the Euro. His definition is:
“Money is an agreement within a community to use something as a medium of exchange.”.
Money is an agreement, not physical stuff.
Whether money is represented by cattle or cowry shells, whether it be tally sticks, gold, silver, paper money, or simply numbers in an accounting system, it is its symbolic accounting value that counts.
What does this symbolic accounting value represent? It is the willingness of its users to trade their time and energy for the time and effort of others, each doing what they are able and have learned to do, or can learn to do, in trade with others in their community.
Money simply formalizes informal exchange as the community grows larger and more complex. It makes possible keeping track of each person or group’s economic contributions and withdrawals in the complex economy. Unlike barter, money also makes possible transactions between multiple traders.
In addition money allows for flexibility in the timing of transactions. In so doing it represents commitments between its users, keeping an accurate accounting of who has contributed how much, and who owes how much over time. It is trust in making and keeping commitments to balance budgets (production and consumption) that allows all money systems, including our own, to operate.
To summarize: Money is the name we give to accounting numbers that measure contributions and consumption in the economy. Money relies on trust in the reliability and fairness of the accounting system structure, and trustworthiness on the part of its creators and its users to keep their commitments, for its successful operation.
Simple money
Let us make our inquiry into money concrete with a simple example of how it can operate. To model this example we will extend barter, the way of the gift economy1, that existed (and still exists) in ‘primitive’ communities.
To quantify barter and the gift economy, we create a formal system of balanced trade. In this simple money system, all market group members start out with a zero balance in their accounts. So all transactions don’t have to be simultaneous, balances revolve around zero, both plus and minus.
Having the system be open source, not for profit, and taking the form of a network, rather than a centralized system of issue, makes its structure consistent with the values of democracy; cooperation, justice, local control and local management. It makes money a commons, rather than an authority centered institution. In this way we mimic the reciprocity of the gifting economy in the structure of money.
In operation, think of it as using a kind of blockchain credit/debit system. In this blockchain system, everyone starts out with a zero balance in their account. If some person or group (lets call them ‘A’) buys something, say food, their account gets a negative entry. Person or group ‘B’ providing that food gets a positive entry. Those entries represent the creation of money.
Buyer ‘A’s negative entry represents a commitment to provide something for someone else to bring their balance back toward zero. Seller ‘B’s positive entry represents a claim on the commitment of other community members for what they might need or want.
The concepts of commitment, and claims on commitment are pivotal to the operation of money. They are a major reason that trust is necessary in its operation. Commitment and claims on commitment also relate to the concept of capital, which we will discuss later.
Money relationships
In this paper, we will call traders prosumers to acknowledge that there are two sides of a money trade, the producer side, and the consumer side. So in the simple money system, we acknowledge that market group members are integrated persons rather than only consumers. Defining people on the street as only consumers, as is done today, disempowers us.
Simple money users make the decisions about what to create our money for, balancing individual needs with community needs, valuing cooperation, compassion and justice rather than creating larger balances. The idea is to have enough, not more.
Democratic money is an example of applying what I call the rights/responsibility equation, a basic measure of morality. In a democracy, the more rights (freedom) we the people have, the more responsibility we each have toward our fellows and to the earth that sustains our lives. If democracy is to work, this relationship between freedom and responsibility must be respected. Operating our own mutual money system for our trade brings the balancing of rights and responsibilities together in our daily relationships.
Keeping balances close to zero maintains a situation where everybody is keeping their commitments, and carrying their weight. Those in the community who are able, are expected to contribute, and those who are not able, or not in a position to contribute, can trust the community to take care of their needs.
In our simple money system, keeping all prosumers’ balances close to zero requires some kind of mechanism so the system isn’t taken advantage of. If transactions create a negative or positive balance in a prosumer’s account greater than what they have agreed on with their peers (the rest of us) automatic stops can be put on them, just like with our current credit and debit cards.
Such a system works best in a community small enough that it’s users know who each other are. Scaling the system can be done by multiplication and connection of local groups, rather than by ‘biggerization’. This isn’t a money accounting system created by some central authority. This is a money system that is created by people and their communities for their own use.
As local communities gain trust between themselves, they can consider import-export trade, and commitments together with other communities for larger projects or specialty goods/services. This trade is facilitated by the use of the same rules of money creation in all local groups. Reed’s law of group-forming networks applies to this structure.
There is no need to manage the amount of money in circulation in a simple money system, as money is automatically created as needed, and zeroed out when balances are brought back toward zero. Some examples of existing efforts that include of the principles of simple money are Time Dollars, the Swiss WIR, and Mutual Credit systems. Simple money is an example of a Mutual Credit system.
Money capital in the simple system
There are at least four classes of capital; money capital, natural capital, intellectual capital and human capital. Here we will address money capital. Natural and intellectual capital will be discussed later. Human capital is what we trade.
In the simple system, money capital is seen for what it is in any money system. Money capital is a claim on the commitment of any/all members of the market community.
Small claims and commitments are simply a part of the transaction-clearing operation of the money system. However if a person or group wants to have a large positive balance (a large claim on commitment/capital) to buy or do something in the simple-money context, they do that by getting permission from their fellow prosumers – the rest of us who will hold the commitment on their claim. The rest of us need to make a decision based on the value of the proposed purchase or investment to the borrower and the community; the rights/responsibility equation in action. After all, we will be left holding the bag if they fail, and will all gain if they are successful. If a community (no matter its size, local to global) agrees on the utility of a project, its members commit themselves to its completion, creating the capital needed. No outside or minority authority is necessary.
Alternatively we, the community, can express our willingness to support someone or some group without repayment, as in the gifting community, crowdfunding their aid by committing ourselves to them. An example might be aiding a local family that lost their home in a fire. Taxes also fit into this category if their use is democratically determined.
Operation of this system requires learning the processes of community decision making. It requires studying and practicing sociocracy, participatory budgeting, and other community decision-making processes.
This conceptualization of capital varies from what even current thinkers are thinking as exemplified in Victor and Jackson “Investment is the process of setting aside income in the present in order to maintain, protect, and enhance the assets from which future prosperity will flow.” These thinkers have not recognized that the function of money capital as commitment is more basic than whether it is a result of savings, or simply creation of money by fiat, out of nothing (which we will discuss later). They, as we all do, see all savings as personal gain, rather than a possible addition to the commons. We will further discuss savings later as well.
Now that we have some handle on how simple money can work, we can contrast it and its results with the present money system and alternatives that have been proposed.
The present money system
Our system is quite different from the simple system described above. In the US it was finalized in its present form by the passage of the Federal Reserve Act of 1913, which created the Federal Reserve Bank, a private-for-profit monopoly.
The Federal Reserve Bank operates like a casino, with the Too Big To Fail Bankers representing the House, local bankers taking the part of contract-table operators, and the rest of us being forced to be the clients of this casino in order to trade and pay our taxes.
In contrast to the simple system, here the chips (money) are created out of nothing (by fiat, ex nihlo in Economicspeak) as loans by the banking system. However reflecting the fact that for every claim on commitment there is a corresponding commitment, in reality private bank money is a loan from the people using it, to the bank issuing it. This fact became evident when we taxpayers bailed out the Savings and Loans in the 1980s and 1990s, and the ‘Too Big To Fail’ banks in 2008, when they got into trouble.
When our present banks make loans, their only legal contract/commitment is to get the money they created ex nihlo back with interest, or get collateral pledged if the loan isn’t paid. As loans are repaid, the money representing the principal is canceled as happens in the simple money system. However the interest wasn’t created as new money; its an additional debt owed to the bank issuing the loan along with the principal. This money/banking structure has three inevitable results.
First, a situation is created where there is never enough money in the working economy to pay both principal and interest back to the banks when all loans come due. Remember, no money was created to pay the interest. As a result, one or more of three things has to occur.
1) The economy has to grow exponentially, so there is enough money in circulation to pay the interest; 2) There must be inflation, creating more money to chase the same amount of economic activity; and/or 3) Some members of the market have to declare bankruptcy, ceding assets to the banking industry, as they don’t have enough money to pay either principal or interest, because others have used the only available money to make their payments.
This is why we are told by the banking industry and economists that growth is necessary. Economic growth is not necessary when the money system is properly structured. And growth, after market maturity, besides not being necessary, is not viable in a finite world.
Second, since the interest charged has greater value than the services rendered, the profit is a tax on the user of that money, paid by the user to the banking industry. The result is a major driver of inequality and the economic power of the banking industry. A secondary result is the continual migration from the periphery to the center of money creation. This is why rural communities are drying up. They are starving for lack of money.
Third, our present money supply is not self-regulating. It is regulated by the quantity of loans the banking industry makes. A principal cause of an over-heated bubble economy is when the banks make too many loans, increasing the money supply. A principal cause of recessions is when the banks don’t approve enough loans to create enough money to make possible the trades that people, businesses and governments need to operate.
In all cases, the Too Big to Fail Banks, the House in our casino metaphor, come out ahead. In the growth economy they gain through interest. In the recession economy they gain by taking ownership of assets pledged.
Money capital and profit in the present system
Money capital and profit are associated so we will discuss them together.
Money capital in the present system is either created out of nothing by the banking system and loaned at interest, or has been accumulated as profit by investors. It is only utilized when it is seen as a producer of more profit/capital. Commitment to what is needed by the community served by the banking and finance communities is at best a second priority.
Note that in the simple system described above, capital is created with the expectation that it will produce results accruing to the community that committed itself to the capital formation. Individual profit is not accumulated. It is not necessary as the community takes care of its members.
A discussion of profit in our present economy is in order here. Profit has two very distinct functions. These functions need to be disaggregated. (Disaggregated is the Economicspeak term for separated/distinguished.) For a very small business, profit is the pay received by the entrepreneur for their time, effort and savings to cover risk.
For a larger business, profit fulfills this function, and also accumulates capital; unearned income; unearned claims on commitment. This unearned capital is distributed to investors and managers, who have previously accumulated capital as unearned income, or borrowed capital to invest from the banking industry, which created it out of nothing, at interest.
Our current private accumulations of capital have to be understood for what they are; the result of a private welfare tax levied on the economy. This tax is paid to investors, managers, and creators of money, through their unearned profit from charges in excess of reasonable costs, for interest, products, or services they have billed out. These private taxes, which are claims on the commitment of the 99%, give enormous power to their major holders.
The money-system private welfare tax is hidden in the transactions of buying and selling because we don’t disaggregate profit. It is justified by all those who have some asset that can provide future income security. However it is none-the-less very real.
As a result of the present money system structure, the accumulation of capital has become an end in itself, rather than a means to make possible things that are needed and wanted by its users.
This corruption of the function of money as capital is at the heart of why it is currently difficult or impossible to get things done that need to be done in our economy, if they aren’t oriented toward profit. Because profit is the bottom line, we work for money, instead of it working for us. This is a major moral issue that we need to confront.
Current initiatives
There are a number of current initiatives that are in the continuum between private for profit money and the simple money described here. Central Government issued money (often thought of as nationalizing the Federal Reserve) is a prominent proposal under discussion. While it is an improvement on the private for profit money system we now live with, it has its problems, when understood in terms of what we have learned in studying simple money.
First, it is created by fiat, ex nihlo, out of nothing, by a central authority like our present casino money. Just like in our present system, in creating money by fiat, there is no recognition that the claim on commitment being assumed by the government has a corresponding commitment; and who is making that commitment, like our present money, us taxpayer/prosumer citizens of the government.
Like private for profit money, Government created money is a de facto loan from the citizens to the Government. Unlike bank created money and simple money however, the loan created by Government money doesn’t have a repayment date. This makes it even easier to ignore the fact that it is in reality a loan.
Because Government money is created by fiat, ex nihlo, with no repayment date, the amount of money in circulation is again not self regulated, and has to be guesstimated and centrally managed, so there isn’t too much or too little in circulation to prevent inflation or deflation. This is one area where the system is open to manipulation. With the size of our economy the probability of manipulation in a faceless bureaucracy is a real danger.
Proposals for quantitative easing/’helicopter money’ are an example of abuse in money creation. In the present case, the money created by quantitative easing has been absorbed by the financial community rather than becoming a part of the money pool for the real economy. It has done nothing to improve the real economy. It has simply increased the claims on commitment of the financial community toward the real economy and kept the money system from breaking down because of its need for exponential money supply growth. As noted before, in the simple system, this is not an issue, as the money supply is automatically managed by its users, as they make their transactions.
Another weakness of Government created money proposals is that they leave the private for profit banks in place as the interface between the government and the users of money. In so doing nothing is done to deal with the use of profit to accumulate money capital, and use it only for issues that produce more profit for those who have accumulated it, rather than having all capital created by its users only when needed, and only for things that are in their best interest.
Government money served well in the Colonial, Revolutionary War, and Civil War periods of our history. However history has shown, both in the case of the Revolutionary War Continentals, and the Civil War Greenbacks, that the private for profit banking industry, over time, manipulated the system and re-took control of money creation, another very real weakness.
While money created by a Central Government may be used for social needs, there is no guarantee that this will happen. Since the decision process is centralized, even if a consultation structure is provided to gain citizen input, it is not part of the basic monetary structure, and can be manipulated or done away with. This is an example of a top down structure trying to act as if it is bottom up. It can work, but is subject to control and abuse by the central authority.
A final difficulty is getting legislation supporting Government money passed by the present government. Members of the present government are so bought and paid for by the banking industry, that expecting them to allow a change that would decrease that power is a non-starter. Just as the insurance industry, which doesn’t have nearly the clout of the money industry, kept universal health insurance off of the table, we have to expect government money to also be off the table.
Cooperative banks and City or State owned banks, following the example of the Bank of North Dakota are other initiatives. While they do move limited control to a more local level, they are still a part of the casino system operated by the central bankers. Systemic control is still at the top, and is still driven by profit.
In contrast to both central government and private money, in the simple system, the people have a democratic stake in outcomes because of basic system structure. They make the decisions of when and for what their money is to be created. They can directly feel the responsibility for the decisions they make on how their money is to be spent, making money creation decisions in their, and the earth’s, best interest.
Finally, in a system composed of nested smaller systems, failures, if they occur, are more local and much less catastrophic than in a megasystem such as the money we now have, or central government issued money.
Natural and intellectual capital
Natural capital and intellectual capital are not directly a part of the money system, but they are a significant part of what money is used to value as capital, so they need to be considered in the discussion of money.
Lets discuss natural capital first. The earth and its assets, natural capital, were here before we came on the scene. In ‘primitive’ societies, these assets were not privatized, as we have done in Western culture. The earth was a commons. Much of this commons has been privatized/enclosed. Privatization was not a democratic process. Steve Roth has clearly demonstrated that ownership is dependent on violence, and as practiced in our present culture,the violence of the state.
The idea of absolute private ownership was locked into the land tenure system (as well as the built environment) by the authorities that enclosed the commons, who wanted control, not democracy. The habit has continued even as we attempted to become democratic, politically. It has allowed us to justify the fact that benefits derived from natural capital logically go to the individual or group that has gained ownership.
This could happen because of the failure to link freedom and responsibility. Ignoring this relationship is becoming fatal for the long term survival of Western Civilization. We need to question the moral logic of absolute ownership.
In a democracy, what right do we have to privatize and use earth assets for personal gain? Better said, how do we rightly assign the rights and responsibilities of being stewards of particular pieces of the earth? These are questions that we must allow ourselves to be challenged by at all scales, from local communities to the community of all people in the world, utilizing the criterion of justice in the use and care of the earth and each other.
A serious argument can be made that the built environment also becomes a part of the commons. As explained earlier, the claim on commitment used to construct the built environment was the result of privatization and of controlling the commitment of the citizens of the community where it was built.
The claims on commitment created by private banks and their owners were acquired through the ability to create fiat money without acknowledging the corresponding commitment on the part of the users of the money they created. This corruption of the money system made possible the use of raw power through profit.
What is legitimate to privatize? As noted, the natural environment was here before we came on the scene. The built environment was funded by the populace; much of both are rightfully kept as commons.
We have to learn to dispense with the concept of ownership, and instead consider rights and responsibilities of management. The homes we live in and personal tools we use, may be considered appropriate for private ownership. Other than that possibility, little else is legitimately privately owned in a democracy. Everything else is part of the commons to be managed by humans as stewards. Again, decisions on this issue must be made at the community level, utilizing the moral measures of cooperation, justice and compassion, the rights/responsibility equation in action. Cooperatives are a natural structure to carry out this function.
However the community level for stewardship of resources such as clean air, clean water, and non-renewable resources includes all of humanity. Humanity is also responsible for humanity. The majority of savings, in this context, is a part of the commons. Working together to provide insurance against risk is a community effort.
Related to physical assets is the question of knowledge; intellectual assets that are created by people; intellectual capital. Copyrights and patents now give their owners the right to control intellectual property, making it possible for them to receive a private tax by charging more than their effort, and/or worse yet, preventing the general production of, and innovation on, new technology. We must ask whether these rights are valid in a democracy.
The drive for profit as the primary directive of the present money system is a major motivation for militarism, bullying, promotion of fear and anger in the population, terrorism, the idea of “take care of number one” without consideration of others, and many other ills. Creative capital is capital that provides for the provisioning of goods and services useful to its users, not fear and bullying.
The present system creates nefarious capital as well as unwanted debt. Cancellation of debt is not even considered by most economists. One exception is Michael Hudson. Write down/cancellation of the debt created by our present money rules is going to have to be a part of the move to a democratic money system and economy. Bailing out those who will lose power as we become more democratic economically will only continue bad aspects of the status quo.
Both production for use, and innovation, need to be considered in terms of their value to society and how much the producer or innovator will rightfully claim for their time and effort. Copyleft and Copyfair are attempts to open this discussion. Open source, democratic, not for profit, people created money supports this paradigm. In removing the profit motive from the structure of money, the motivation for trade becomes the act of provisioning, rather than profit.
So if we want a world that is sustainable, resilient, and promotes justice for all, it is imperative that we change the way we do money. The present system, with its requirements for exponential growth and continually increasing the divide between rich and poor is inconsistent with these goals.
Georgist thought is relevant to this issue. What Georgists call land rent is an example of the unearned portion of profit, in this case derived from ownership of land. Implied in the Georgist land tax is a responsibility to the greater good of the local and the larger community of humans and nature that comes with the right to be the steward of that land.
The work of Elinor Ostrom is also relevant to our discussion.
Ostrom’s first four principles describe the values that guide the appropriate use of the commons: “1. Define clear group boundaries. 2. Match rules governing use of commons goods to local needs and conditions. 3. Ensure that those affected by the rules can participate in modifying the rules. 4. Make sure the rule-making rights of community members are respected by outside authorities.”
Her fifth through seventh principles discuss the values that are involved in enforcement: “5. Develop a system, carried out by community members for monitoring members’ behavior. 6. Use graduated sanctions for rule violators. 7. Provide accessible, low-cost means for dispute resolutions.”
Ostrom’s eighth principle for managing commons describes the nesting of scale “Build responsibility for governing the common resources in nested tiers from the lowest level up to the entire interconnected system.”
Ostrom’s principles are impossible to initiate in the context of the values built into our current money system. Removing the unearned portion of profit from the structure of money is a necessary step in the process of change. Simple money does so, and unlike our present money, follows all of Ostrom’s principles in its organization.
Trust in the present money/financial system is waning. Its need for exponential growth is not consistent with a finite economy, so it is not long for this world. We need to be creating an alternative that is viable, and consistent with democratic values.
Simple money can do this. Centering the power of money creation locally in a nested system, and structuring it to promote provisioning instead of profit, makes localization of other institutions and habits that don’t happen in the context of the present money system viable. Communities can more easily come together to support their needs.
Finding ways to deal with or replace the income received by small savers, and redistribute or cancel that of those who have gained much wealth as a result of their operation and manipulation of the current money system, are issues before us. Some of this will simply happen as the present system collapses and is replaced by a sustainable and resilient money system.
Conclusion: How do we get to better money?
” If we regard money as a thing, it becomes a given, and we lose our ability to change it in any way. . . . When we understand that money is created by a set of understandings and practices, we can begin examining the terms of these agreements to see whether they actually serve our collective aspirations and objectives. Currencies can be redesigned to better meet our needs.” Bernard Lietaer
Following Buckminster Fuller’s idea that we don’t concentrate on what is wrong, but on creating institutions that serve those of us who use them, and exhibit moral values that are consistent with what we need and want, we create a new system, and let the old one go its own way, as it doesn’t serve our use.
Unlike government issued money, simple money requires no legislation for its introduction. It can be introduced by its users. It will initially not be coin of the realm; useful in payment of taxes, but it will be useful to its users, and will demonstrate this usefulness to them, and those they deal with. Acceptance can be gradual, as approval is gained. Simple money can support alternative businesses and institutions in their development and operation. In time, it can be acknowledged as official coin in local jurisdictions, and then larger ones.
Open source blockchain accounting systems are the natural form for mutual money to be organized with our present technology. However in setting up democratic blockchain platforms, it is important that all the values built into the simple democratic system are implemented.
Instead of ‘mining’ for money, money will be created as a commitment to other members of the community. Balances will revolve around zero instead of always being positive to maintain the zero sum game. With these provisions, the money supply is automatically regulated.
It is important that systems be limited to a community scale, and that users know who each other are, so trust can be informally as well as formally supported. Structures need to be put into place so that users set limits on positive and negative balances, to prevent abuse. Crowd funding can be structurally facilitated, as well as community funding.
Another necessary criterion is to choose a universal unit of account that is representative of the work performed and traded. Physical objects or symbols of physical objects, like backed money, are poor measures of this symbolic value, as their value is affected by supply and demand, rather than being an accurate measure of time and effort.
An accounting system structured to measure time and effort is the functional solution. Remember from our earlier discussion that what we trade is our willingness to spend our time doing something for others that we can do, and trading that time and effort for the time and effort others spend doing what they do..
Though imperfect, the hour of work is the best indicator we have of time and effort for a money unit. It will have to be used flexibly, as some work is more stressful and/or dangerous than others, and some work is less desirable than others. The place of prestige in considering the value of current highly paid work will inevitably grow less. What is now seen as low prestige work, will make gains.
The hour of work as a measure of value reflects the idea of the disaggregation of profit. It values the time of all prosumers as of more or less equal value, rather than what the market will bear. We need to replace the word profit with the names of its components; value of work done, and private tax on the market.
A very small charge on outstanding balances, both positive and negative, will be appropriate to cover system expenses and promotion. This would be a lesser expense than current charges for credit and debit transactions.
Local, democratically created money can be used to promote the local economy and do things that for profit money doesn’t support. We can concentrate on local needs instead of how to get enough money to export some of it to Wall Street as a private tax to benefit the 1% and .001%. Bernard Lietaer has noted that when this type of system is put in place, it promotes the gift economy, a way to contribute without having to be paid.
The biggest challenge is maintaining circularity in system operation. It is imperative that all users be able to both earn and spend in equal amounts. Success depends on circularity, just as the success of a natural ecosystem depends on circularity. This contrasts with the current economy that operates in a source/sink mode, rather than a circular mode, where everything is recycled or reused.
As communities become more cohesive by making financial decisions together, and relate to other communities in the same way, the influence of mass media to manipulate opinion and knowledge will weaken. Reality about the state of the world and its problems will become more obvious.
Climate change, extinctions, degradation of soils and habitat which we depend on for our food supply, financial institutions taking advantage of their clients, militarism, etc, etc, can be dealt with, as is already being attempted in some localities. Government taxes will need to be looked at, to see if they serve the people who pay them, fulfilling the responsibility end of the rights/responsibility equation This will require pressure for participatory budgeting at all levels.
According to Ellen Brown, the central banks see the advantages of block chain money, and are considering opening their own platforms. Getting distributed power blockchain platform systems in place before autocratic blockchain platforms gain strength would facilitate acceptance.
Are we ready to replace our present money with money that works for us instead of us working for it, or are we going to try to fix it with half way measures or leave it in place and attempt to control it? Neither of the last two choices has a good long term prognosis. A disruptive technology such as simple money has a much better chance of success than an attempt to morph the present system into something that serves its users.

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